Tim Geithner: The Forrest Gump of World Finance

He’s a punchline in his own country because he oversees the IRS even though he conveniently forgot to declare $80,000 of income (and managed to get away with punishment that wouldn’t even qualify as a slap on the wrist).

Germany and America were on a collision course on Tuesday night over the handling of Europe’s debt crisis after Berlin savaged plans to boost the EU rescue fund as a “stupid idea” and told the White House to sort out its own mess before giving gratuitous advice to others.German finance minister Wolfgang Schauble said it would be a folly to boost the EU’s bail-out machinery (EFSF) beyond its €440bn lending limit by deploying leverage to up to €2 trillion, perhaps by raising funds from the European Central Bank.”I don’t understand how anyone in the European Commission can have such a stupid idea. The result would be to endanger the AAA sovereign debt ratings of other member states. It makes no sense,” he said.

All that’s missing in the story is Geithner channeling his inner Forrest Gump and responding that “Stupid is as stupid does.”

…at birth?

Separated…

This little spat reminds me of the old saying that there is no honor among thieves. Geithner wants to do the wrong thing. The German government wants to do the wrong thing. And every other European government wants to do the wrong thing. They’re merely squabbling over the best way of picking German pockets to subsidize the collapsing welfare states of Southern Europe.

But that’s actually not accurate. German politicians don’t really want to give money to the Greeks and Portuguese.

The real story of the bailouts is that politicians from rich nations are trying to indirectly protect their banks, which – as shown in this chart – are in financial trouble because they foolishly thought lending money to reckless welfare states was a risk-free exercise.

It is a relatively simple matter for a government to put a bank in receivership, hold all depositors harmless, and then sell off the assets. Or to subsidize the takeover of an insolvent institution. This is what America did during the savings & loan bailouts 20 years ago. Heck, it’s also what happened with IndyMac and WaMu during the recent financial crisis. And it’s what the Swedish government basically did in the early 1990s when that nation had a financial crisis.

But politicians don’t like this “FDIC-resolution” approach because it means wiping out shareholders, bondholders, and senior management of institutions that made bad economic choices. And that would mean reducing moral hazard rather than increasing it. And it would mean stiff-arming campaign contributors and protecting the interests of taxpayers.

Heaven forbid those things happen. After all, as Bastiat told us, “Government is the great fiction, through which everybody endeavors to live at the expense of everybody else.”

It is pathetic to witness the cognitive dissonance and hypocrisy that the European Welfare mentality has gotten itself into.

Europeans believe in the Welfare State, i.e. production from productive people is haircut to support less productive people. So what’s wrong with productive German supporting less productive Greek ?

Resistance to redistribution is inconsistent with the very European philosophy espoused by a majority of people on the Old Continent.

As Europe integrates more and southern Europeans gain more pan-European voting rights, the hypocritical stance of Northern Europeans (who support social democracy inside their borders but refuse to apply same philospophy to an integrated Europe) will be democratically overruled. Southern indolent majorities will join forces with Northern indolent minorities to form a pan-European indolent redistribution majority. And because strong redistribution requires copious amounts of central planning, Europe is about to venture into new levels of redistribution and central planning. As it is, Europe is already on a trendline to economic extinction without the imminent further flattening of the effort/reward curve. I don’t know what miracle are Europeans hoping for to avert decline.

Sure, some Europeans are realizing — with ever increasing desperation — that further flattening of the effort/reward curve cements Europe’s path to economic marginalization on the world stage – but those Europeans have virtually no hope of ever attaining majoritarian status to roll back redistribution and central planning on the old continent. Even the most ambitious and electorally unrealistic plans for reforms in Europe will be simply too little too late. Three plus billion people in the developing world have finally awaken from their once mandatory collectivist hibernation. So how is the Western World reacting to the challenge? By adopting mandatory collectivism, of course! History will one day write about the suicidal wisdom of denial in a declining western world clinging to HopeNChange. Yes, prosperity parity with the developing world! That will be SOME “change” for sure. Let’s “hope” we don’t mind.

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[…] to fail. More specifically, they should be put into something akin to receivership (similar to what the U.S. did 20 years ago with the S&L crisis and a few years ago with WaMu and IndyMac, and also like what Sweden did in the early 1990s). This automatically prevents financial crisis […]

[…] fail. More specifically, they should be put into something akin to receivership (similar to what the U.S. did 20 years ago with the S&L crisis and a few years ago with WaMu and IndyMac, and also like what Sweden did in the early 1990s). This automatically prevents financial crisis […]

[…] easy money as an alternative to fiscal restraint. Especially when the United States is a source of laughably bad advice from the clowns in the Obama Administration. GA_googleAddAttr("AdOpt", "1"); GA_googleAddAttr("Origin", "other"); […]

[…] cold of winter? Though maybe we’ll give Treasury Secretary Geithner a riding lawnmower since he’s the Forrest Gump of this Administration. Even security has been put to the knife, at least a little. Junior ministers no longer get […]

Seriously, how is this article even remotely fair to Forrest Gump? He did well as captain of his own shrimpin boat, and would also be more effective as treasury secretary. I demand an apology to Mr. Gump!